One of the most powerful methods of analysis is the modeling of financial series using Levy processes. The main advantage of these processes is
It consists in the fact that they can be used to simulate a huge number of phenomena – from the simplest to the most complex. Enough
to say that the idea of a fractal price movement in the market is only a special case of Levy processes. On the other hand, when
With the right selection of parameters, any Levy process can be represented as a simple moving average. Figure 1 shows an example
the Levi process with a fragment magnified several times.
It consists in the fact that they can be used to simulate a huge number of phenomena – from the simplest to the most complex. Enough
to say that the idea of a fractal price movement in the market is only a special case of Levy processes. On the other hand, when
With the right selection of parameters, any Levy process can be represented as a simple moving average. Figure 1 shows an example
the Levi process with a fragment magnified several times.
Let’s look at the possibility of using the Levy process to smooth the price chart. First you need to select the process parameters
Levy in such a way that it could be used to simulate a linear process. Then we get a system of weights, which includes
coefficients of different signs. Thanks to this, we will be able not only to smooth out the financial series, but also to track anti-trend and
the periodic components present in it.
Levy in such a way that it could be used to simulate a linear process. Then we get a system of weights, which includes
coefficients of different signs. Thanks to this, we will be able not only to smooth out the financial series, but also to track anti-trend and
the periodic components present in it.
- The indicator operation is adjusted by selecting the LF parameter. It defines the depth
the history that will be analyzed. The allowed value of this parameter is in the range 0-255. And the number of bars
that are used for the calculation will be two more than this number.
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- The indicator operation is adjusted by selecting the LF parameter. It defines the depth
the history that will be analyzed. The allowed value of this parameter is in the range 0-255. And the number of bars
that are used for the calculation will be two more than this number.
The blue line shows the result of smoothing the High prices, the green line refers to the Close prices, and the red line refers to the Low prices.
The main disadvantage of this indicator is that the smoothing is performed according to a hard-coded algorithm that does not take into account
sharp and strong changes in the market. Also, as in all smoothing indicators, there is a lag, which can
reach the values of the simple moving average.
sharp and strong changes in the market. Also, as in all smoothing indicators, there is a lag, which can
reach the values of the simple moving average.
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